Friday, September 17, 2010

A Credit Suisse analyst is bullish on two engineering and construction companies, saying the prospects for new oil and natural gas contract awards are improving.

Analyst Jamie Cook called shares of Fluor Corp. and Foster Wheeler AG "top picks" in a note to investors on Wednesday. The companies build infrastructure to ship natural gas, and their shares have been depressed because natural gas prices have been relatively low. Natural gas prices are trading around $4 per 1,000 cubic feet on the New York Mercantile Exchange. That's higher than the same time last year but only about half of what natural gas traded for in 2008.

Cook said prospects for new contract awards and additional backlog for oil and natural gas work "should ramp up in 2011," citing private industry sources. "Areas of optimism include Saudi Arabia, Abu Dhabi, Australia, Brazil, India, China and Iraq, but longer term," Cook said. Cook maintained an "Outperform" rating on Fluor with a $56 price target. He maintained the same rating on Foster Wheeler with a price target of $31. Shares of Fluor fell 9 cents to $48.85 in morning trading. Shares of Foster Wheeler fell 18 cents to $24.22.

From BloggingStocks:

After a rough patch, the shares of engineering company Fluor Corp (FLR), first discussed here on February 17, 2009 at a price of $39.21, appear to be on the mend.

Fluor's shares fell dangerously close to the $39 sell/stop loss this summer, falling to about $40, but have since recovered.

Long-term, FLR's outlook remains favorable: additional capital investment work in emerging markets will add to FLR's large bookings. Look for double digit revenue growth in 2011 after flat to modest 2-3% revenue decline in 2010. The later is primarily due to clients reducing planned, capital investment projects, as a result of the milder-than-expected U.S. economic recovery.
A strong balance sheet and opportunities for increased business in Latin/South America and Asia add to the positive story.